Note: Any reductions in indexing payments would only effect the part of your pension related to service from 2023 and beyond.
If, in the future, the plan experiences a shock that could not be managed through investment returns and contribution increases, the OMERS SC Board at that time would have to consider benefit reductions in order to maintain the health of the plan. One of those benefit reductions could be a partial or full reduction in the indexing being paid out that year. In order to implement a benefit reduction of any kind, the OMERS SC Board would have to vote by a 2/3 majority to implement the reduction. This means at least some of the employee appointees would have to be in favour of the reduction.
A pension that is in payment during a time where indexing has been reduced or eliminated would see its annual increase in pension reduced or eliminated entirely (again, only for the portion of the pension related to post-2023 service). This does not mean the pension would shrink; it would just not grow by as much, or at all, and it would continue to not grow until indexing is restored, again by a 2/3 vote of the OMERS SC Board. Once indexing is restored on a go-forward basis, the OMERS SC Board would be able to turn its attention to restoring members to where they would have been if indexing never been removed or reduced. Only once indexing is restored would they look to reduce contribution rates for employees and employers.
While this means potential volatility for future retirees, this is part of spreading the risk of managing plan shock between plan members working now and plan members who have yet to join the workforce and who will likely spend their entire careers contributing to a “mature” plan where benefits being paid out far exceed contributions being collected.
Further details, such as the amount of reduction and the exact point where plan health would require a reduction in benefits, will be up to the future OMERS SC Board to determine. The PAO is committed to ensuring that our representative on the SC Board is prepared and empowered to make the right decision for current and future plan members. The PAO will always favour an evidence-based approach to the pension promise.